Morning View: Aussie Pushing the RBA’s Patience

Overnight we saw the AUD crunched off the back of USD strength and then falls exaggerated compared to other risk currencies. As Felicity Emmett from ANZ explains, it was the Aussie that was the hardest hit:

“With few domestic drivers the Australian dollar followed the trends of the broad US dollar and weakened sharply.”

“That said, it underperformed on all the crosses as iron ore forged a new low despite news that the Chinese authorities seem to be more open to adding stimulus to the housing market in China.”

This morning we see a couple of low impact data releases to start off our Tuesday in Australia, with New Home Sales followed by Private Sector Credit. But ultimately through the Asian session, it’s the USD and rate cut expectations on the back of lower commodity prices that will drive direction for the session.

This just adds further fuel to expectations of a rate cut next week. The RBA’s thinking will be that with the PBOC Governor jawboning down China’s expectations for growth, backed up by low prices in Iron Ore, they will almost have to do something to try to stimulate other areas of the Australian economy.

On the Calendar Today: Not much on the calendar during Asia bar a few low impact releases from Australia which shouldn’t have too much of an impact. The ones worth keeping your eye on if you are trading either currency is Business Confidence out of New Zealand this morning and then Current Account data out of the UK later tonight.

Tuesday: NZD Business Confidence GBP Current Account

Chart of the Day: Markets have priced in a 66% chance of an RBA rate cut in April. An extra piece of information to keep in mind when trading any AUD pair.

AUD/USD Daily:

Click on chart to see a larger view. So the AUD/USD trading scenarios that we discussed yesterday were that we could see a retest of previous channel resistance now as support, or we would tuck back into the descending channel and look for a re-activation of the trend line for a possible short entry. It’s pretty clear that we tucked back into the channel and zooming in closer in the hourly chart below, we can see that there was the possibility of a nice short term trade.

AUD/USD Hourly:

Click on chart to see a larger view. In the highlighted green box, you can see that when price came back through the previously broken trendline, it retested it on the hourly chart before making new lows and never looking back. For me, it’s always beneficial to keep broken trend lines on your chart for this reason. Just because they have been broken, doesn’t make them useless in the future.

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